BackThe Supreme Court, in its ruling of June 27, 2023, determined that the position of the Tax Agency, which systematically denied the deduction of these remunerations by classifying them as “gratuities or donations” due to mercantile irregularities, was unreasonable.
This approach was endorsed by the Supreme Court in other judgments issued on November 2, 2023, and on January 18 and February 20, 2024. However, none of these cases analyzed the effect of the company’s bylaws expressly stating the gratuity of the administrator’s position, something that is addressed in a new judgment.
The ruling of the National Court, which was subject to an appeal in cassation, denied the deduction of salaries paid to three executives of a company who simultaneously served as members of the Board of Directors. It was argued that the doctrine of the link established that the commercial relationship prevailed over the labor one, so being the administrator’s position free according to the bylaws, all salaries paid by the company should be considered as donations or gratuities not deductible according to article 14.1.e) of the Consolidated Text of the Corporate Income Tax Law (TRLIS).
The absence of provisions in the company’s bylaws regarding the remuneration of the administrator or director’s position cannot always lead to the consideration of the expense as a gratuity and, therefore, its non-deductibility.
It is important to note the mention that the High Court made in the admission order and in the judgment to the expression “in any case,” which suggests that, in certain situations, the lack of statutory provision regarding the remuneration of the position could lead to the non-deductibility of the expense. This factor must be considered together with other evidence to determine if we are facing a gratuity.
Finally, the Supreme Court reaffirms its previous jurisprudence by recalling that it is not appropriate to apply the theory of the link in the tax field to deny the deduction of salaries paid to workers who perform functions as administrators or directors.
The judgment issued on March 13, 2024, clearly establishes that the lack of statutory provisions regarding these remunerations does not automatically imply that they are non-deductible gratuities. It is recognized that it is possible to demonstrate the onerous nature of these payments through other means.
Therefore, those companies that, cautiously in the past, considered these remunerations non-deductible due to the gratuity of the position according to the bylaws, may initiate the necessary processes to recover the excess taxation that they may have borne for not deducting these expenses.
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